Welcome back to another episode of The Fifth Hammer Growth Podcast! In today's episode, "Uncovering the Power of Core Values: How Microbe Formulas Transformed its Culture," we are diving deep into the success story of Microbe Formulas and the key decisions that made it all possible.

We are unpacking the importance of defining your company's identity and core values and how documenting them can have a powerful impact on your organization.

Join us as we explore the journey of Microbe Formulas' growth and the pivotal moments that shaped our path to success. So, grab your headphones and get ready to find harmony in imperfection as we explore the world of business and personal growth.

In today's session, we're excited to talk to you about three moments in time and

decisions that really added up to a lot of the success at

Microformulas. And we'll dive deeper into

the formula that we talk about what that means and what it can do for

you and what it did for us and what it means and looks like to

be an education first and media first company and the difference between

documenting core values and creating them and how those can

impactful for you and your organization.

You are listening to the Fifth Hammer Growth podcast, where we help you

find harmony in imperfection as you journey towards success

in life and in business.

Earlier, we shared moments in time kind of decision making

frameworks of what brought us to Microformulas. And now let's

jump in. In the season of running, grinding,

building the company, growing it, what are some key moments in time

or decisions or focuses that really helped us

navigate our way to the growth that we saw there?

And we'll just start teasing some of these out. Yeah, it's

interesting. As we were thinking through this,

one of the things that early on kept coming

up, kept coming up, kept coming up was, who are we as a company? Who's

our identity? And I remember certain individuals

were saying, we need some core values, we need to figure this out. And

I was always like, Hold off, it'll

come. And it never felt like because I've been in situations

where there was a mission statement and that mission statement, mission. Vision,

values, how many times do you hear that every business needs it? And it was

always forced so robotic. Yeah. And to

me, this was a Fifth

Hammer moment because I was pushing back and I'm like, we're not ready for it.

It'll manifest, it'll come, it'll show. Right.

Really, I think the thing that was the catalyst

to it is we started a Book of the Month Club, right.

The first book we read was Extreme Ownership. And extreme ownership

became almost our company bible for our

culture in a lot of ways. So much

for when we started documenting what our core value was. Extreme

ownership was a core value. Right. But it was interesting

because it got to the point where we were growing, where we were

knowing who we were, we were starting to understand our own personal

behaviors. And the idea of sitting down

and documenting our core values was important. Yeah. And what I love

about that, too, is the business mantra of the world

is you got to have a business plan. You got to have all this documented,

you got to have all this in place before you see success, before you go

out and play. And we kind of flipped that backwards a little bit of like,

hey, we were operating a successful

seven figure business, growing it to eight, and we weren't

documenting what we wanted it to be. We just documented how

we were already operating, right? The core values, the personal core

values that Dr. Tod Watts had, that Dr. J had, that you had Ryan,

and that as a company, we were striving for

not perfect in, right? But that we wanted to try to adopt and

scale across anyone in the company and any new person potentially

joining it. And I think there was power in that exercise of just thinking

through what are we already doing as individuals and as a

collective, because that's what culture is. Culture is not what you put on a wall.

Culture isn't what you put in an employee handbook or in an onboarding

process. It's how you actually act every

day as an individual and as a group.

Well, I'm glad you said that, because my first day on the

job was a leadership meeting where we were in

part, refining these core values. And coming

from I worked for a $4 billion supplement company or a Fortune

1000, and there's all so much cliche

organizational bureaucracy and things that people just say,

you guys were actually and I didn't know this at the time, but I remember

kind of rolling my eyes that we were doing that, I'm sure.

But then very quickly, within the first couple of weeks, seeing that, oh, you

guys are just documenting the culture as it is.

And there were many times I leaned on those to either

give me permission to act in a way that I thought I needed to act

to lead. Like, I remember the extreme ownership kept

and that was another one that I thought was so cliche because people talk about

that all the time. You guys actually did it, and our CEO really did it.

If you were wrong about something, you were the first person to raise your hand

and say, I was wrong. Right? And then extreme

ownership all the way up and down the chain by allowing us

to be collaborative in how we developed our plans. I think that's actually the

real gold nugget in extreme ownership. It's not decentralized. It's not,

I was wrong, because that can actually be a crutch, by the way.

It is the collaborative nature of building the plan with the team

all the way up and down the chain. So there's full buy in. That's what

extreme ownership, I think, really is to me. And you guys didn't mean

to hijack the topic, but that's what I saw you guys really doing.

But it's important, too, because the other side of it, taking

extreme ownership, is one of our core values. The other side of

it was cover and move. I'm glad. Yeah, I was about to say that.

You know what I mean? You want to talk about a book that you can

open up and just any chapter has impact on you. Cover

and move, leading up and down the chain of command. These were phrases

and terms that we use daily within the

and we lived it. And that's what I loved about how we

documented and I love the word that. And

Spencer, you said this first, is we didn't create core values. We documented

core values. Right. And the fact that

those ideas of COVID and Move and how do we lead up and down the

chain of command, it was always there. I think the other one,

that was so cliche, but we lived it was people

first. Yeah, right. And that was a challenging one. They're

all challenging. Well, at the end of the day, core values create a

framework for your employees and your team members to hold you accountable as

a leader. And you're not perfect, and the company is not going to be perfect

and other people aren't. And so it creates tension. It

creates natural

dissonance. Right. I

remember that one being so challenging because how do you define people first.

And what person are you focused? Because here's the problem,

right, is if you're truly people first across the board, how do you

put your customers first and your customer support team first?

When there's a conflict, right? Conflict

challenges people first because, yeah, we want to put the

customer is always right, but not really, because freaking customers are wrong. They're freak

flat out, like, 90% of the time, they're wrong. So the

idea is, and we use this constantly,

is how would you want to be treated if it was you?

Right? I get where you're coming from, but how would

you want to be treated? And that's the idea of putting people first is how

would you want and then you came in and I love this one. Spencer

was in the realms of people first is we always

talk about the Golden Rule, but what's the Platinum know? And then it's like,

dude, you got to treat people the way they want to be treated, which

is challenging for know, because

I don't know how you want to be treated. Right? And it's hard to know,

and it's hard scenarios where those two things, they're opposite beliefs.

The Golden World, treat others how you want to be treated, and the Platinum Rule

treat others how they want to be treated. Those are opposite opposing beliefs. But there

are scenarios and situations where one works and one

doesn't, and the other one works and the other doesn't. Right?

And we could talk all day, but. Can I drop a quick side note, though?

If you think the book extreme ownership is cliche, go pick up

Jocko's. It's still jocko, but go pick up leadership, strategy

and tactics. It wasn't until I read that book that I

understood Cover and Move. I had a team at the time that was very

combative and disagreeable,

and we were kind of running loosey goosey. And then I

remember texting you guys one morning on, like, a Saturday, because I was reading that,

I was like, oh, my God, I know what I haven't preached as a

leader is cover and move. But it came out of that book, so I just

wanted to drop that real quick. No, I appreciate that. And that's the thing about

core values, especially if you could document them for your company,

that they don't really mean anything

unless you internalize them, unless you figure out. And I think that's the one thing.

That we do, and even when you do, and even when you try

and you will fail and you won't live your core values all of the time,

you have to be prepared as a leader, as a business owner

for people saying, you're not living up to these quarterbacks. Yeah, they're going to call

them and. It'S going to happen even no matter what your intentions and

your efforts are. Yeah. You'll think you are knocking it out of the park

and you'll find out from your team, actually, some people will use them against

you. Oh, absolutely. And that's the thing. As part of that,

Spencer, you told me constantly that people hear

you like you're talking through a megaphone and they watch

you through a microscope. Right. And that's that concept

is how true are you to the core values that you freaking put up

on the wall? Because they walk by them every day, they read them, and

they're going to either hold you accountable and they analyze you under a microscope

or hold them against you. Right. And so as a

leader right now, as a leader, if

you're not willing to live up to the core values that you've set for your

company, then get them out of your freaking company. Because they don't just don't even

have them. Just don't even have them. Totally. So I think that was one of

the first things that we did really well, because it set the stage for the

culture. I think the other thing that we

did very well early on

is we acknowledged that we had

mega influencers in Jay and Tod. Right.

There's this whole influencer marketing is

there's a lot of good and bad about the term and phrase of influencer marketing.

There's a lot going on about how do you truly manage influencers and how do

you get it? And I believe that influence

marketing has its place, but in

order for it to truly, truly work, those

influencers need to be a part of your company in every way,

shape or form. Jay and Todd were the best

influencers that I've ever seen in any company. But they were

owners. They had an equity stake, so they were

all in. But they also approached it with the

mindset of, like, they knew it

was necessary, but they didn't necessarily

want the fame and the accolades, right. And the

attention. They weren't counting their freaking likes or their

followers. I watched Todd shed a tear, a genuine tear and

multiple tears over customers. That's how it was

genuinely to help. And you can't fake that. And that's

what the customers saw that and they were attracted to that. And that was the

other mindset that pervased the culture. But it was a conscious decision

that we are an education company and a media company.

And it was those two things that came from you and from Dr. J that

those were decisions and those were things we said that impacted

thousands of. Other little I mean, you think

about that concept when you have the power of these two amazing influencers.

And I joke about I pimped them out like freaking crazy. Every

time we could turn around we had them on camera. Every time we turned

around, we had them creating content. And we

became that media company first, right? We became

that education company first. We happened to sell supplements.

Supplement selling was a byproduct of what we were truly doing. If you

look at the day to day activity of the company, it was

all around building content, creating

content, like. Telling the stories, telling the story and

educating the audience. And it was the weekly live with the

docs from the D to C side. We had customer after customer

after customer. They would come on and answer questions. Yeah, and again, this

predated me. So thinking about coming in from the outside, looking

in, I heard you say we're a media company first. And I rolled my

eyes because I've heard Gary Vee say that since 2006.

And I've been a part of many companies that say that and they just don't

do it. So the proof is in the actions. If

you're listening to this and you're thinking about where do I go next? And you're

thinking about your criteria for what makes a good company, just look at the

actions. Don't listen to as much as what they're saying. You guys

were genuinely flying to locations,

creating documentaries around the

customers, telling the stories, but not just telling the stories.

Man, this wasn't like a testimonial. This

was like a full emotional story. And the reason why I say emotional story is

because I think as marketers we miss this point. Emotion

is what creates the flywheel of belief because it

lowers the barrier, that skeptical barrier low enough to

get over top of it and really pay attention and make a connection.

So I don't know, I just think that's an important distinction because we

talk about stories in education. I think the stories come first because that's

what raises the belief and opens the mind enough to pay

attention to the education. Well, and the education got so big to the

point where we decided we were going to do our own

event, our own practitioner event. And we opened up

a to this day

I don't even remember Eco being how eco came across, but it was

extraordinary clinical outcomes. Exponential,

exponential clinical outcomes. And it was the concept

of our own event. And we had this vision of we're going

to have 5000 doctors on this thing. Right? And

our first one was standing room only because Tod kept saying yeah, just come, just

come, just come, just come. And we had 90 people in the room

by the time we had our event and exited.

We had 800 people in the room with another three or

2500 on virtual. This last one that they just did this

last year, it hit 5000 numbers and we

grew. Education was a huge part of how we grew. And I

think companies need to realize the importance

in today's environment of educating their

and taking an active role in that education

and having somebody that that customer, whether it

is a D to C or practitioner in the health

space industry. And I think it's the same across the board where they can find

trust. Because I remember

sitting outside of an event waiting. We just got to this

hotel and location was in place and I was sitting there talking with

somebody who showed up early. They got there the night before and they were getting

their hotel room and Todd walked around the corner

and it was a Beatles effect. This girl, this

woman, grown woman started hyperventilating because she

saw Todd and that dude, the biggest

heart that he is, walked up to her, gave her a hug,

said thank you so much for being here, knew her name

and she almost fainted. And I was like,

that right there is the impact when you start putting

education and media and you start creating relationship with your customers

that I've never seen in any other company. Yeah, and it was so

powerful for these people too because they had been told so many times nothing was

wrong with Know. And then Todd and Jay

basically affirmed the feeling that they had

and made them feel whole, know, put them on a path and it was

so powerful. It's unlike anything I've ever seen and it's hard for other

businesses to do something like that. But I

still think there are lessons in the story and then the education and then the

education not just around your product but the education to help

them solve a problem that is, by the way, related to the

solution your product provides. And let's maybe

talk about one more. The education focus and the

core value focus really spanned across the two channels we had

in both D to C and in wholesale and

was a powerful tool. But there was other powerful tools, powerful decisions and one that

you brought in, some of those were you kind of came in the middle of

the core values. You came in after really the focus on education media,

but one that you really brought to the table, Dave, was something we call the

formula, right? And we talk about quite a bit and leveraged

a ton. But tell us about what the formula

is and we can talk more about how that was a decision to really implement

it in the company and how that helped our success. Yeah, so,

man, I wish I invented this, but I swiped it from Drew

Sanaki, who is now, I think, the CEO of Postpilot.

He's had multiple, like, nine figure been CEO of nine figure e

commerce businesses. I think he got it from Jay Abraham, who said, there are three

ways to grow a business. Get more customers, get them to buy more, and

get them to buy more often. Well, the funny thing about that is it actually

breaks down into a formula where if you take your customer

volume, so the total volume of customers repeat and first

time, and then you take your average order value across all

those. And now we can break down how valuable these metrics are.

But just know, we scaled to a $50 million business pretty fast

on the back of this. If you take those two customer volume and

AOV, and then you take your buyer frequency, which is how many times over

the course of a period of time somebody makes a purchase, let's just say in

a year in this example, and you multiply those three together, you will

get a revenue number. If you do it right now, you will actually

get your current revenue number. And it will maybe plus or minus a few thousand

dollars. But I had brought that to the

table for almost ten years to different founders and

CEOs, and nobody really embraced it. And to Ryan's point, you guys not only

embraced it, it was everything for us.

And the beauty of that formula is it's not

really a forecasting tool, although it can be used as that.

It's a focus tool. And I've tried to

think, there are some really smart people in e commerce. Taylor

Holliday at Common Thread Collective is like one of my favorite

people to follow. I just love how he thinks. He's just so brilliant. And he's

got a version of this that I think is really great for forecasting in general.

But this was our formula. Customer volume

times AOV times buyer frequency equals revenue was a way for

us to catch the

wind without wrecking the ship. And what I mean by that

is, in an environment where you're growing so exponentially

fast, it's all you can do someday is just to hang

on. In those environments, your

plethora of opportunity can sometimes wreck you as well and cause

bottlenecks. And it was like the perfect marriage of Ryan as

the CEO, and his belief and core value

of extreme ownership, but also giving us space to operate, allowed that formula to be

successful. Because I would just go to my team and

say, they would say, well, what are the goals? And we would sit down together

and collaborate on this formula. We would set targets for customer volume, for AOV, and

for buyer frequency. And because we hired people that were

experienced enough to understand how to execute against those, tactically, they would

just run. And then I would turn around and. Report what we did to you

guys, and we would be like, cool. And it kept us focused because

at any given time, it wasn't like, we need to do influencer marketing.

We need to do YouTube ads. It wasn't like a tactical discussion. It

was, we need to increase customer volume by 20% this

quarter to hit this revenue goal. Oh, and by the way, if we

increase buyer frequency by zero point 25, we can blow that

goal out of the water. Okay, what's that mean, guys? That means we need to

work on our acquisition funnels. We need to work on our offers, we need to

increase our ad spend by X, and then we might need to run a couple

of promos towards the middle goal of each month to increase buyer frequency. And

then it really just guided everything we did.

Also, for me, the cool thing about the formula is

that

most people don't believe me when I say this, but I actually am

a pretty logical person. Your

optimism overcomes your but when it. Comes down to it, it's

like, math makes sense to me. Math

just makes sense to me. It's the chess player in my mind. I love playing

chess. I grew up playing chess with my dad. And when you introduced the

formula and tied revenue to that

structure, it just opened the

entire concept of marketing to something that I could make

sense. Simplifies it. Yeah, well, it turned it into an engineering exercise for you.

I think it really did. And not only that, but then you could turn around,

because with a formula, from a programming standpoint,

I can tie in algorithms to each of those individual

formulas and start playing with different

structures and constructs that are built around this

formula. So it's like, okay, today we're going to write a

function that will increase buyer frequency. And how

do we do that? What functions can we iterate on

that will increase buyer frequency, and

it becomes a program, a code structure

that allowed me to really understand what the

marketing team was doing and how they were doing it. Right. And the other

thing that I think the formula had a huge impact on was in the AOV

side of things, because initially we were selling individual products

and we had products that would work together. And until

we saw and understood, how do we increase average order

volume, that's when the idea of kits came into play.

That's when the idea of protocol came into play. Because if you could bring these

together, when we

initiated the protocol and the product protocol,

our average order volume went through the roof

because the people understood

most customers will have the product that they love.

Right. But they don't understand how the whole thing works together. When

we introduced the protocol,

initially, it was like an $800 package. I mean, it was

expensive, and we broke it down into month structures and you could

buy this, but it dramatically

increased our average order volumes. And it was those

exercises based on that formula that

allowed us to take the company to the next level.

And it was the marriage of the formula and the education talk

about the roadmap to health that Dr. Jay and Dr. Tod kind of introduced and

mapping protocols to, that the marriage of those two things

created, that Flywheel created, made the wave

even bigger. But there's probably dozens more of

pivotal kind of moments in time or decisions that were made throughout the course of

the five years of growing that business. And I'm sure we'll talk about more,

but I think we should leave it at that for today. And also just tease.

There were plenty of mistakes we made along the way, plenty of things we did

wrong, and we're going to be sharing those, too, because we don't want this just

to be like roses and butterflies and like, hey, look at us, we did something

cool. But we hope we can also share some of the things we

didn't do that we should have or we did and were wrong

that you can avoid and learn from, too. I'll just put a plug in there.

The biggest mistake I made early on was not

hiring a chief financial officer

CFO initially. We'll dive in. Yeah,

early on, if anybody's starting a company, running company, if your

financials aren't dialed and you don't have a clear picture of where things are

going. I had a good framework. Yeah, you had constraints. I had

constraints and a good framework. And when we hired

a CFO, we were working on building those constraints in there. But I

wish we would have been able to hire him earlier or a

CFO earlier so that we had a better, clearer picture and really did

forecasting, really did some of the things that. We didn't do, especially if you're going

for an exit, which you weren't really going for at the time. But yeah,

that was the biggest. So three really positive ones. One big

mistake was I would have hired if doing it all over again, I would have

hired a CFO earlier. Love it. That's a